I've never changed the rebel settings and never have trouble with the pirates using a couple of general rules.

1. Keep a fleet (or more if you can afford it or have stretched out borders) of 4 of the smaller warships to clear out those annoying 1-4 ship fleets that pop up. They usually do the trick and usually don't lose more than 1 with even the worst result.

2. Always leave your ships in port unless you have no other option. The AI seems to disregard ships in port and rarely if ever blockades. They seem to wander to certain catch points (or just don't get cleared from those areas - I never run with FOW off.) Usually after I get below around 200BC I rarely if ever even see one spawn.

Personally, I'm convinced the AI will only allow so many rebel armies and navies on the map at any given time so once the Indian ocean is filled up with pirates, you don't tend to get spawns. I could be wrong but it's certainly my gut feeling from many games.