XMP files not being generated

Yeah very important to realize that Lightroom classic works very differently from Bridge. It uses a centralized database (the catalog) to store all edits. As Johan says, it is important that you use the backup function often for that reason. It is really rare that a catalog file becomes corrupt but not unheard off. Writing the xmp sidecars is a convenience feature that does come at a performance cost. Small but sometimes noticeable. Also important to know that as Johan says, not all info can be stored in the sidecars such as what collections things belong to and that makes protecting your catalog file important. Lastly, if you happen to edit the sidecars externally to Classic such as by using camera raw on the files from Bridge, those changes to the xmp are NOT carried back into Classic. In fact if you have automatic writing of sidecars turned on, they will just get overwritten. You can read the data from the sidecars manually into classic but as said, that is not automatic!

If having the sidecars as main repository of edits is important to you, you are better off using Bridge. You can now also use the local browser mode (I wish Adobe added this to Classic) in the cloud version of Lightroom and that also uses the xmp sidecars as main repository, but this local browser mode is far less powerful and full featured than bridge or classic.