"It appears that Sea Serpents are distant relatives to the native dragons of Ardania, which have been thought extinct since before the times of the Great Kings."
From "The Overall Description of Everything" by Master Alfus Bumblegate.
Advanced Magic Caster
Strong Scales: Resistance: +30 Melee, +15 Missle
When there's one, there is likely another - AI players seem to avoid exploring water, so many of their spawn points remain even in the late game. It's always a good idea to escort your transport ships mostly due to the Sea Serpents. They also love to attack coastal cities.
When attacking a unit, the Sea Serpent will most often remain in one place until it or the enemy is destroyed. If it attacks your ship or flyer, just move away to land if you're not sure you'll win. If it attacks a coastal city, move in your shooting unit for an easy experience (just one, so it doesn't suffer much from the area of effect). Sea Serpents are quite vulnerable to ranged units.