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The bonds are debt financing. What they are doing is supplying capital for an insurance contract, similar to catastrophe reinsurance that keeps insurance companies afloat after disasters like hurricanes. What's really responding to the situation, or waiting to respond, is an insurance policy. Basically, it will say something like "if this many deaths happen in this period of time, we will accept the financial consequences up to this limit."
It's a multi-step risk transfer... take the risk from the local people and local governments and transfer it to a large government organization - government as insurance. Then, because the government organization doesn't actually have the funding for extreme catastrophes, create a financial instrument that allows for the transfer of risk to a corporation, syndicate, or other well funded organization that can underwrite enormous risks. Insurance companies, reinsurance companies, syndicates of insurance and finance houses, etc.
Now you have a contract that says the risk is on the company/syndicate if it reaches a certain level. But that company can also offload part of the risk to sophisticated investors (institutions, family office, rich folks, etc.). Investor buys a bond, and company sells that bond, to supply capital for the insurance program. I would have to read the instrument itself to take you past this point; according to that article, the bond does not perform if the policy pays (or, that's what it implies). At any rate, the bond investors' returns are, in some capacity and through some agreement, tied to whether or not the insurance contract is triggered. That contract probably does not care whether some expert calls this a pandemic. I think it is likely tied to death tolls and dollar amounts. Insurance is usually, though not always, good about things like that. I can name some exceptions to common sense though.
Someone with more google-fu than I have the energy to express today might find a copy of one of these contracts, and then I could tell you a lot more about it. But there is some secondary source information here, which more or less confirms my assumptions about how the contracts would be structured.
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