Cannot connect USB drive to macOS VM on Mac Studio

MacOS 13.2.1; Parallels V 18.1.1 Preferences... - Devices is set to 'Ask me what to do'. Running a newly created MacOS VM. When I plug in a USB Thumb drive into my Mac Studio it connects to the real Mac Studio. It never asks if I want to connect it to the Host (Mac Studio) or the MacOS VM.

Am I missing a setting?

 

I posted this earlier today Cannot connect to MacOS host from MacOS guest, what?
Can you at least connect to the drive from the Guest OK by browsing the network, connecting to your Host, and selected the Drive?

Somehow after installing parallels, even my other Macs are having a real issue with connecting to anything on the Host now.... Not just the Guest is having this issue now.

 

Thanks for the quick reply.
The 'Permanent Assignment' list is empty. If I plug the USB thumb drive into the Mac Studio it gets assigned to the host, ignoring my 'Ask me what to do' setting. If I then add the device into the 'Permanent Assignment' list, the 'connect to' options only show my Windows and Linux VM's not my MacOS VM.

I do not know if the is related but my MacOS VMs 'Settings' button in the Parallels control center are either disabled or missing (see attached image). The MacOS VMs were installed using the Parallels "automated" File -> New -> Create New - Free System -> 'Download macOS'