In a large skillet, heat the olive oil over medium heat. Season the chicken with salt and pepper and add to the skillet. Cook, turning once, until golden, about 5 minutes; transfer to a plate. Reserve 2 tablespoons oil in the pan.
Using a food processor, puree the onion. Add to the reserved skillet along with the garlic, scraping up any browned bits. Puree the red pepper and add to the skillet along with the cumin and bay leaf. Increase the heat to medium-high and stir in the potatoes, tomato sauce and 1 cup water. Lower the heat, cover and simmer for 10 minutes.
Add the chicken, skin side up; cover and simmer, stirring, until the chicken is cooked through, about 30 minutes. Discard the bay leaf. Top with the cilantro.