I will probably include one or two tales of selkies and kelpies in this collection later on - folklore that Iceland shares with other northern European countries like the Faeroe Islands, Norway, Ireland and Scotland. However, I haven't come across the following piece of folklore in the folk tales of other countries. If you know of similar folklore about bears in other countries, please leave a comment.
The story goes that bears(*) are really humans under a curse, and that the she-bears give birth to human babies that only turn into bears if the mother is able to pass her paw over them.
The story is told that once upon a time on Grímsey, an island and the northernmost inhabited part of Iceland, that a man noticed a she-bear that looked poorly. He went into the barn and got her some warm cow's milk to drink. Later that same night, when he came back to give the cows their evening feed, the she-bear was in the barn, giving birth. He was able to get one cub from her - a large and healthy human girl-child. He took her back to the farm and there she lived for some time, was in good health and grew quickly.
She was, however, always trying to leave the house after she was able to walk, and would always head towards the sea. Finally, she made it to the sea and climbed aboard an iceberg. Then the she-bear appeared and passed her paw over the girl, who immediately turned into a bear cub.
(*) To Icelanders in the old days a "bear" meant a "polar bear".
Copyright notice: The wording used to tell this folk-tale is under copyright. The story itself is not copyrighted. If you want to re-tell it, for a collection of folk-tales, incorporate it into fiction, use it in a school essay or any kind of publication, please tell it in your own words or give the proper attribution if you choose to use the wording unchanged.