Hi,
If you never created a USB passkey/security key, you do not need to insert one. When the prompt appears, select Cancel or Sign in another way and use your password, PIN, or another available method.
I also suggest checking your Microsoft account security settings for any passkey or security key you do not recognize:
https://account.live.com/proofs/manage
Microsoft’s passkey troubleshooting guide: https://support.microsoft.com/en-us/accounts-billing/security/troubleshoot-signing-in-with-a-passkey
If this USB prompt appears even when you are not signing in to a website or Microsoft account, please let me know which app/page triggers it and, if possible, provide a screenshot.