Sea Monsters

 Sea Monsters are sea-dwelling mythical or legendary creatures, often believed to be of immense size. Sea monsters usually attack large (or small) ships.

Variations
Giant Squid - These giant beasts have 6 small arms and 2 extendable ones near the front.

Giant Crab - These crabs have enormous claws and almost impenetrable shells. It takes a lot of hits to kill it.

Pufferfish - This fish normally remains at normal size but don't get too close because it can expand its body.Oddly enough it cannot be destroyed by whirlpools.

How To Defeat Them
Blast them - This is the simplest way to kill them. If you have cannons, blast them 'till they die.

Lure them to rocks - There are rocks around Golden Harbour (South-east on the map). If you lure them there, they can be tricked into slamming themselves against the rocks.

Lure them to Whirlpools - There are a few whirlpools between Dragon Cove and Bouffant Bay. You can lure the sea monsters there to kill them. (Note that this method does not work on pufferfish.)

Pirate Ships - If you are under attack by pirate ships at the same time, try to get them to slam themselves together. This way you can kill both the pirate ship and the sea monster!

Ram them - Use this as a last resort, if the monster is low on health, ram your ship against it.

Trivia

 * A similar crab monster can be seen in the Ice Age 4 Ad.
 * Many of these sea monsters will attack you continuously if you head to the top-left corner of the screen.