When I do something like:

 var customSettingsMax = AsDynamic(new {
    Width = 350,
    ResizeMode = "Max",
    format= "webp",
    quality= 100
  });

<img loading="lazy" src='@Link.Image(imgUrl, customSettingsMax)'>

It wil not generate a webp. However, when I do:

<img loading="lazy" src='@Link.Image(imgUrl, customSettingsMax, format: "webp")'>

It will, so I think the format setting is ignored somewhere....