The black insulating foam always breaks down from UV light, and I also found that crows love to pick on it. For such a short outside run, I'd just repair it myself with some of the same and then keep an eye on it. When it breaks again in a couple of years, it's a cheap fix.

There are some higher-quality products that my HVAC guy swears by. They supposedly stand up to the environment for longer. But I am not sure you can buy just a small quantity. So, this could be cost-prohibitive. And again, for such as small distance, it probably doesn't matter anyway.

I also saw on Amazon, that you can buy UV protective tape that you can wrap around the foam after insulating your lineset. My HVAC guy doesn't use it, as it is apparently not officially certified for use by the code that my local city uses. But from a pragmatic point of view, that might be a more cost-effective method to extend the usable life.

I can't quite tell where the drip is originating from. But the line that has the insulation is the cold line. So, you'd expect condensation somewhere around there. That's in fact why you put insulation on as much as possible. Condensing water vapor releases heat. So, any increase in condensation means a decrease in efficiency. But of course, in practice, some amount of condensation is unavoidable and perfectly normal.