Missing: option to unlock with Apple watch on 2016 Macbook

Hi. I have:

2016 Macbook (12") running Monterey 12.7.2

Apple Watch 5 running WatchOS 10.3

iPhone 12 Pro running iOS 17.2.1

I have 2FA switched on. I am logged in to my iCloud correctly on all devices. I've tried hard rebooting my watch and checked all the iCloud settings on my Macbook but the option to unlock my Macbook with my watch has just disappeared. Is it just gone now or can I fix this somehow?

I've done a load of Googling and tried quite a few things but nothing seems to have worked. Thanks!