Setter's embracing a royal queen (4)
I believe the answer is:
mary
'queen' is the definition.
(Mary I or Mary II)
'setter's embracing a royal' is the wordplay.
'setter's' becomes 'my' (belonging to the crossword setter).
'embracing' is an insertion indicator.
'royal' becomes 'r' (abbreviation).
'a'+'r'='ar'
'my' enclosing 'ar' is 'MARY'.
(Other definitions for mary that I've seen before include "Sinner who became a follower of Jesus" , "could be Wesley" , "a religious icon" , "Person venerated by Christians" , "-- Queen of Scots" .)