@Mike250 Two reasons. One good, one bad.
The good reason is that it just might make potentially problematic guests think twice before booking. "Hmmmm... This place has a $300 security deposit, and I know my pals and me are gonna trash the place... let's keep looking."
The bad reason is that it suckers us hosts into thinking AirBnB has our back. Which they absolutely do not.
That said, I know not to count on it but I still set it, for reason #1 above.
Lastly, the "host guarantee" rarely does any good either. It's AirBnB's way of bluffing hosts, just as the security deposit is our way of bluffing guests. Sad, but true.