Preheat the oven to 350 degrees F. Brush a shallow 2 1/2-quart baking dish with butter. Put the potatoes in a large pot. Whisk the cream, flour, bay leaf, nutmeg, 1 teaspoon salt and 1/4 teaspoon white pepper in a bowl, then pour over the potatoes. Cook over medium heat, carefully stirring occasionally, until the cream just comes to a simmer, about 12 minutes. Continue to simmer, adjusting the heat if necessary and stirring to prevent the bottom from scorching, until the potatoes just begin to soften, about 5 more minutes.
Transfer the potato mixture to the prepared baking dish; discard the bay leaf. Set the baking dish in a roasting pan and add enough water to come about halfway up the sides of the baking dish. Bake until the potatoes are tender and golden brown, about 1 hour. Remove the baking dish from the water bath and let stand 10 minutes before serving.