The Icelandic Transport Authority: Registrations
What rules apply to registration of damage to cars/vehicles?
A vehicle should be registered as a damaged vehicle if it has suffered damage that may affect its drivability and safety. If such damage has occurred to a vehicle, the vehicle shall be registered as a damaged vehicle and its use prohibited. The police and insurance companies shall inform the Icelandic Transport Authority of such damage. The owner of the vehicle receives a notification that a damage registration has been made. If the owner has doubts that the damage does not justify a registration of damage from the police, they may have it re-evaluated at selected inspection stations within a specified time limit. Notification of claims from insurance companies cannot be re-assessed. Repairs of damaged vehicles can only be carried out by an approved car repair shop if it is to be registered again in traffic. Further information is available here.
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