I believe they are encrypted (and decrypted on device by the Signal app).
They recently had to do some rewriting of the code for iOS15 - they share some comments about that here: https://community.signalusers.org/t/beta-feedback-for-the-up...
Hope it helps
I'm actually surprised they didn't use a notification extension before. They're surprisingly great as an API - I used it to dynamically render preview line chart images for a finance app I worked on a few years ago. Just send over the limited line data, render the image, and you're good to go.