Does this hold any merit, or am I being had?
There is no merit whatsoever to this claim. While settlements in both places were occasionally subject to pirate raids, neither was ever in danger of foreign invasion until modern times.
According to an Icelandic saga called the Landnámabók (Book of the Land Taking), Iceland was given its name by Flóki Vilgerðarson, an eighth-century explorer who, after seeing his cattle die during his first winter on the island, named the place "Iceland" out of spite.
Similarly, two other Icelandic sagas tell the tale of how Eric the Red gave the name "Greenland" to the land he discovered because he wanted to encourage his fellow Norsemen to settle there.