When I play these sort of games I like to have a variety of nations playing at different AI difficulty levels which is common in many TBS and RTS games these days, Stardock has been a great example of this function. For example, I made a smaller "wildman" nation who plays at the Easy difficulty level while a nation like Capitar plays on Medium and Magnar, being the emergent threat, plays on Hard. I believe that this gives a variety of gameplay and difficulty while also making it more fun and varied.
To the point, when I load a game it doesn't appear to display the difficulty I had them set to in the launcher but rather sets them to the world difficulty.
I'm hoping this is just a display bug and that the game is actually setting the AI to play at a higher difficulty. So, is the AI difficulty being set correctly and not just being based off the world AI?