The settling locations are selected based on a score. AiList StandardSettlePlot contains parameters that are used in the process. One of them is "Nearest Friendly City" set as default -10. It means that every tile that a spot is away from the nearest city decreased the score by 10. This is adjusted e.g. for naval maps to -6, so the cities are a bit more spread out. Also when expansion strategy is active, it is updated to -4 for even more remote locations.
So, in summary, AI is no way "forbidden" to settle further and you can adjust its "affinity" to settle cities closer or further.