There are excellent other instructables here for this solution. However, I made this one and thought should share it.

What you need:

Strip of silicone rubber

Pizza cutter

Shrink tubes of small and large sizes

Step 1: Split the Strip Down the Middle

I used a pizza cutter for better control but any art knife or box cutter would work as well.

Split it down part way only. Leaving long enough split ends that can be bent over the chuck key grip bar.

Step 2:

Slip over a large size shrink tube over the cut to act as a tear arrestor.

Slip over the smaller size shrink tubes over the split end.

Bend the split ends over the chuck grips and grip it in the shrink tube

Heat the shrink tubes and you have your key end done

Step 3: Fasten to Drill Cord

At the other end, slip the large size shrink tube over the end, roll the end over the drill cord and heat the shrink tube to fix it.

Although, I have shown the key holder fastened to the drill end, a better idea is to fasten it at the plug end so you are forced to unplug every time you use the key.

Step 4: Final Assembly

This is how it looks all done.

I used the silicon strip off a take up wheel from a broken printer.

You could also mould a strip from Sugru. I tried the Sugru but I think the strip I made was too thick as the split ends broke while bending them over the chuck handle and over the cord. But will try again once I have some more Sugru in hand.