There is a legerdemain item of it I think, but I can't remember that it got specified anywhere what kind of bug it was. It is probably a smaller insect rather than a large one. Probably comparable to the purple snail in medieval times.
This Bosmer was tortured to death. There is nothing left to be done.
Dunmer apparently have a thing for insects, as an unamed stolen item's description reads "Perfumed oil distilled from the musk of a giant spider, Dark Elves regularly apply generous amounts to their wrists and ears." Source: https://www.imperial-library.info/content/items-second-era
I can't find Telvanni Bug Mask on any of the lists of stolen items, unfortunately.
That's odd; I'd have thought they'd at least make a stealable item out of it. Maybe it hasn't been invented yet? If the bug came from Vvardenfell, my understanding is that Vvardenfell was colonized fairly recently, so maybe they still have to discover it.