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It should appear when you become top faction.

I had games when it happened very early, especially on lower difficulties.

I don't know how is calculated which faction is on top, by power. Unlike Civilization games, warlock lacks any graphs that would show power level of different factions.
 
My guess is that it ranks factions based on a combination of cities, resources, and military strength, the way most 4x games do. The AI a lot of times likes to stock pile a huge military when it has the cash. So you probably took the lead after killing much of their military.

Also they probably spent off most of their resources. Contrary to what some people think the AI does not have unlimited funds. It just starts the game with a huge cash reserve which allows it to rush build a massive army. But after it spends it's starting funds it rarely has any sort of decent income. This is why the AI runs out of steam after the first wave, where as if you play another human you will often get wave after wave of conflict.
 
That means that you are considered the most powerful great mage, and that other mages envy you, thus have lowered diplomatic relations with you.

I have found nothing else to compare how powerful the other lords are, so that "envy of the leader" is the only hint in the game who currently the strongest Great Mage is?