There are a couple of reasons for that, most likely. First, only 4.5% of the known cases in Iceland are over 70 years old. In Italy, around 16% of the population is 70+, so given that this virus has much higher death rates for the elderly, we would expect a much lower death rate than Italy. Second, there are still 11 people in intensive care (compared to six deaths). I'm not sure what the mortality rates are for patients that require intensive care, but I assume they would be much worse than average. I think I remember seeing about 20-30% mortality for ICU patients from a study in Italy. Finally, the majority of cases in Iceland are still ongoing, whereas many villages in Northern Italy have gotten through the worst of it, with fairly few cases unresolved. I bet that the age adjusted fatality rate in Iceland will end up being fairly similar to Italy.