Electronic structure calculations are used to analyze the electronic and
magnetic properties in {KFeSe}. Fe atoms can be divided
into two distinct groups. The (parent) compound forms an insulating,
collinear, local moment phase with high N{'{e}}el temperature. We show that
large biquadratic exchange coupling and exchange-elastic interactions stabilize
the magnetic order. For the additional Fe atoms fill vacancy sites.
They form impurity bands for small , which broaden as increases. They
determine the states at the Fermi level and may be viewed as a magnetic
subsystem separate from the host. Spin fluctuations are prevalent because
magnetic interactions between the defect' and the parent’ atoms are
relatively weak, while chemical fluctuations are prevalent for low .
Fluctuations of either type leads to the formation of a weakly metallic state.
The unusual coexistence of the two magnetic subsystems offers a new perspective
as to how superconductivity and strong antiferromagnetism can coexist. We argue
that spin fluctuations of the impurity subsystem share common features with the
Fe-pnictide superconductors.

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