Nudity must be set in two places for it to be applied, even in single player mode.

  1. in the server settings
  2. in the game play settings

    Also it can be edited manually…
    edit the Game.ini and the serversettings.ini located in:
    Conan Exiles \ ConanSandBox \ Saved \ Config \ WindowsNoEditor

Change the line in Game.ini from NudityLevel=# to NudityLevel=2
And the line in ServerSettings.ini from MaxNudity=# to MaxNudity=2

Edit: if you are using the GamePass version.
Nudity has been locked out by GamePass

The only way I know of, to get around this is to switch to the Steam version.

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