I've been given this some thought and what if this were the case:
Level 20 in all factions - custom flag emblem unlocks
Level 30 in all factions - custom sail emblem unlocks
Level 40 in all factions - custom hull emblem unlocks
Level 50 in all factions - legendary versions of each (which might include "shiny" colours) and the ability to recolour front ornaments (palette swap).
The emblems would be as I described before in the thread, simple layer-based compositions, no scaling, and only minor movement (if at all).
Doing activities and achievements could unlock new layer shapes, frames, frills, animal shapes, item shapes.
Maybe instead of custom text, you could also add unlocked titles for the ship - similar to the ones that unlock for pirates. Or ship names that you pick from a template of approved words? And they appear on the side of the ship.