So let's do this: Halldór Laxness, of course, and the only Icelander to be awarded the Nobel Prize for Literature (1955). He wrote a lot but his novel, Independent People, is arguably the best novel of the 20th century. I normally gulp books because I'm a fast reader but this one I didn't gulp. I'd read just so much and then I'd have to stop and absorb it. He writes like the sagas, without dipping into stream of consciousness, but the effect on your mind is devastating.
Another writer, contemporary with Laxness but not as well known, is also considered a giant of Icelandic literature. Þórbergur Þórðarson, relatively unknown outside of Iceland, has had two of his works translated and published in English, The Stones Speak and Of Icelandic Nobles and Idiot Savants.