If you can see a polar bear it’s a threat.
They really aren’t like other bear species. They are an apex predator in an area where basically nothing other than another polar bear can even harm them. They see most things as food, including humans.
As a bonus, Iceland has a pretty wonky ecosystem that needs protecting as is and polar bears aren’t native to the island. They have to swim extreme distances to get there, making relocation extremely difficult and expensive, plus if they leave it be it will entirely disrupt other wildlife in the area, to say nothing of the human population.
As others have said, it sucks that it got shot, but Iceland especially has very limited options on how else to deal with it. Shoot on sight is, unfortunately, a very reasonable policy for them.
On our trip a few years back we got some simple pastries, sandwich supplies, and snacks from Bonus to save money and I never felt like we were missing out on good food. Even as a discount grocer everything we got from there was super good.