NOTE: Please do not use regular cornstarch for this recipe if you are following a low carb diet. The recipe editor tool would not allow me to list this ingredient as a low carb thickening agent, such as thick-it-up, but this is what you should use.
For the sauce: Combine cream, water, onion, salt, pepper, and nutmeg in a small saucepan over med heat; bring to a simmer. Remove from heat, let stand 15 minute Strain the cream mixture and return to the saucepan. Set aside.
While the sauce is standing, put chicken, bay leaf, parsley, salt and pepper in a large saucepan; add enough cold water to cover. Bring to a boil, cover, reduce heat to med-low, and simmer until chicken is just cooked through, about 10 minute.
While chicken is simmering, place the saucepan with the sauce over medium heat. Whisk in thickener; cook until sauce thickens, about 3 minute.
Remove from heat; swirl in cheese and butter until melted.
Place the cooled chicken on a serving plate, patting dry any liquid with a paper towel; pour the sauce over it and serve.