It is understood that the boat, which belonged to a hotel on Coconut Island and had an estimated value of B1.2 million, was having trouble starting when the fire started near the popular marina at about 9am.
It has been reported that five people were on the boat when the fire started from the engine at the stern of the boat, igniting the fuel tank which then exploded.
Noticing the fire, marina security skippered a dinghy to help tow the burning vessel further away from the populated marina, before it finally was overcome by flames and sank abot 200-300 meters from the marina.
Of the five captain and crew rescued from the 8 metre long boat, two have been transported to hospital to receive treatment for serious burns, while three suffered minor burns.
The name of the vessel and victims are being withheld.