Relics of ship swathed in setbacks (7)
I believe the answer is:
fossils
'relics' is the definition.
Although both the answer and definition are plural nouns, I cannot understand how one could define the other.
'of ship swathed in setbacks' is the wordplay.
'of' becomes 'o''.
'ship' becomes 'SS' (prefix in ship names eg SS Great Britain).
'swathed in' is an insertion indicator (swathe can mean to wrap).
'setbacks' becomes 'fils' (I am not sure about this - if you are sure you should believe this answer much more).
'o'+'ss'='oss'
'oss' going within 'fils' is 'FOSSILS'.
Can you help me to learn more?
(Other definitions for fossils that I've seen before include "Old bones" , "Skeletal remains" , "Prehistoric remains" , "Petrified remains" .)