Your iPhone has a policy that requires a new Apple Watch passcode

I totally do not want to use passcode on my Apple Watch! I've been tried for few months, it's really annoying. I don't want to enter even once the passcode. Also the simple passcode feature is greyed out.

I know how to set passcode off and I can but then the watch displays "Your iPhone has a policy that requires a new Apple Watch passcode."

The connected iphone (12 Mini) is not company phone. I bought both of them new, am the 1st & only owner.

I asked for help in apple support but conversation keeps breaking & still have no solution yet.

iPhone screen time > Content & Privacy Restrictions is On and passcode changes is Allow.

I don't want to unpair & reset the watch as it's been customised so long.

If it's not from the iOS, please let us know which apps demand such requirement.