Legal answer: no. Thtat's just your interpretation. It is technically correct, but it may be not the one and only technically correct interpretation.
Technical answer: The point, here, is avoid that an exception thrown by a mutating iterator (think to an inserter or to an output iterator) causes an algorithm to be abandoned while letting a container in an undefined and inconsistent state (think, for example, to a linked list with the links not yet completely re-linked)
It's not just a matter of bad_alloc for iterators that have a dynamically allocated state, but also of an iterator that -during it's own copy- tries to modify a referred item failing in that (for example, because the item assignment throws).
When such a case happens, the iterator is not required to "complete the algorithm" (that would be impossible) but to left the container in a consistent and still manageable state.