Why: Policy does not allow granting permissions at this level to one or more of the recipient(s). Please select another permission level and send the sharing invite again. – Outlook

This problem occurs if the sharing policy doesn't allow the user to share the level of detail that the user set in the sharing invitation.

1. Connect to Exchange Online by using Remote PowerShell.

2. Determine the sharing policy that's assigned to the user. Run the following command and note the policy returned.

Get-Mailbox User1 | fl *sharing*

3. Update the sharing policy for the user. Open Exchange Admin Center -> Organization -> double-click the policy that is assigned to the user in Individual Sharing.

4. On the Sharing Rule page select the calendar sharing level that you want to allow under Specify what information you want to share, and then click Save.