I thought it happens with all colony ships that get destroyed regardless of race. They switch sides. I am curious what the actual function is now too. I do play Yor a lot so maybe it's only them?

This the normal reaction for colony ships.  They nearly always join whoever defeats them in battle.

They don't join the space monsters because they do get destroyed, and baby space monsters are born in their place.  I think they do get destroyed by pirates.  I know they join precursor sentinels.  They join everyone else.

You can defeat colony ships that have joined the precursor sentinels to get extra colony ships.  You can also defeat your colony ships that have been defeated by someone else to get them back on your side.