Fairfax reported the three were flung from a 9ft Zodiac inflatable boat that was carrying them to shore when it was hit by a 17ft boat from the Front Street Ferry Terminal in a three-boat collision.
A local claimed the larger vessel did not have lights on and had ploughed over the top of the Zodiac.
Arthur is a passionate sailor. Fairfax reported the couple were big supporters of Team NZ and spent a lot of time sailing in the Mediterranean and Caribbean.
Denis Owen, owner of local charter vessel UberVida, told local news site The Royal Gazette crew onboard his boat found McKee in the water.
"One of our crew members jumped into the water with a rescue device," he said.
Owen said the woman was brought on board UberVida and CPR was performed before paramedics were able to take over back at the dock.
"She was unresponsive."
UberVida was docked in the harbour on Thursday night (local time). Crew were preparing to clean when they received a distress call suggesting someone was missing in the water.
Owen told The Royal Gazette two other small boats were in the area searching when his staff members found McKee.
He said despite his crew not being able to save the woman, he was very proud of their efforts.
"Unfortunately the result wasn't what we wanted.
"Everyone was pretty upset."
A member of the McKee family, who asked not to be named, told the Herald the family is "pretty cut up" and didn't want to speak about the tragedy.
The America's Cup is being held in the Great Sound, which narrows to form Hamilton Harbour where the tragic incident happened.
Local police said in a statement that a 26-year-old local man has been arrested for alleged impaired operation of a watercraft. He passed a breath test but remained in custody pending further inquiries.
Bermuda Police said the local man was driving a 17ft centre console vessel from Front Street Ferry Terminal towards White's Island.
The boat collided with a 9ft Zodiac inflatable carrying three people who were thrown overboard.
"The collision was witnessed by passengers of another small boat nearby and they were able to render immediate assistance," local police said. "The occupants of the Zodiac all received injuries.
"The Bermuda Police Service extends sincere condolences to the family and friends of the deceased."
A Bermuda Police Service spokesman says no charges have been laid yet.
Calling it a "sad and tragic event", Minister of National Security Jeff Baron extended condolences to the family of the victim.
"It appears that three smaller boats were involved with four people injured, three men and one woman," the police said last night.
"All four were rushed to King Edward VII Memorial Hospital via ambulance, where the woman was pronounced dead.
Baron said: "This has been such a sad and tragic event, and we extend our sincerest and deepest condolences to the family of the victim and hope for a swift recovery of those injured.
"I wish to stress that the public safety of all attending the various events across our Island is of paramount concern for our security services personnel and we continue to encourage care and caution during this very busy time in Bermuda."
Bermuda Water Safety Council chairman Ralph Richardson agreed the death was sad, especially during a "festive time".
"My thoughts go out to the family of that individual," he told The Royal Gazette.
Richardson stressed to The Royal Gazette the need for boaters to exercise "extreme caution" when out at night.
"It's very difficult at night to tell how far away an object is from you," he said, particularly given the harbour is currently very crowded.
"Every boater that goes into Hamilton should do so at lower speeds."
Another issue he raised was the hundreds of new boat owners the council had become aware of on the water "that have very little experience".
"I would implore anyone that has bought a new boat to become very aware of the rules," Mr Richardson said.
Richardson suggested the current 10-knot speed limit for vessels in the harbour, could be replaced with a five-knot limit.
"If you can't see properly, you shouldn't be going fast," he said.
A spokesperson for The Ministry of Foreign Affairs and Trade said: "The Ministry is providing support to the family and will continue to assist them at this time.
"The family have requested their privacy be respected."
A forensic pathologist was expected to arrive on White's Island to assist with the investigation, according to Bermuda News.
Detectives were actively investigating the incident and are appealing for witnesses or any persons with information to come forward.
