I do not encrypt the assertions between my IdP and splunk, nor do I see a requirement to do so. However splunk will only accept signed assertions:
signedAssertion = [true|false]
* This tells Splunk if the SAML assertion has been signed by the IDP
* If set to false, Splunk will not verify the signature of the assertion
using the certificate of the IDP.
* Currently, we accept only signed assertions.