It’s not an insult, although it could be.
I ran across the word in a recent Christopher Fowler Bryant and May novel (this one was Wild Chamber, but they are all excellent! – each one different, each one fall over funny, dark, wise, and each will make you say, “you too!” when you read/hear Fowler gently poke a stick at the ridiculous, the incomprehensible, the rubbish-talkers) and looked up the word “quango.” Good word, isn’t it, you quango, you.
Anyway, it’s an acronym (which can be distinguished from an abbreviation, in case you thought the two were synonyms – they are not (and for extra credit, the words amuse and bemuse are not synonyms either to the “strictly speaking” among us, although you can render someone bemused by using the two words interchangeably)).
Quango = Quasi-Autonomous Non-Governmental Organ
There is a 1983 New York Times article that describes quangos, “Lets Define the Quango.” There are other descriptions in other places online (and in print), but all pretty much cover the same ground. Look it up.