This puts the UR bookings at a higher risk than using CC as payment form. IIRC Visa (may be MC too) provides 120 days for chargeback on financial insolvency. UR bookings would mean a total loss of UR pts which are real cash loss at the basic 1c per pt value.
The Chase coverage is for the loss on Prepaid, unrefundable expenses from the trip cancellation caused by financial insolvency of a provider.
Last year there were quite a few LCCs went belly up, Wow and Primera came to mind. Those may have caused quite a number of claims that far exceeded the normal actuarial risk in the model. Hence the cut. I have no issue with the cut but the stealthy way Chase removes the benefit is truly disgusting..