The Unknown Island was colonized by the Ancient Lizardman Empire.
The Ancient Lizardman Empire was founded 20 000 years before the foundation of the Kingdom of Etrand
(20 833 years before the game's time).
The Unknown island was colonized by the Lizrdmen 6000 years before the foundation of the Kingdom of Etrand
(6833 years before the game's time).
3700 years years before the foundation of the Kingdom of Etrand
(4533 years before the game's time), the Ancient Lizardman Empire was split in two: the Continental Empire centered in Southern Etrand and the Insular Empire, centered on the Unknown Island. Not a single soul from Atrograch
(the name of the continent: Etrand, Etrancoast, Froturn, Dragoc, Neressa, Aratburro and Brutang are parts of Atrograch) has ever heard of the island ever since, nor anyone from the island ever heard a word of Atrograch anymore.
3000 years years before the foundation of the Kingdom of Etrand
(3833 years before the game's time), the Continental Lizardman Empire fell, while no one knew what happened to the Insular Lizardman Empire. A thousand years later, much of Atrograch was colonized by the Ancient Elves
(common ancestors of the Wood Elves, High Elves and Humans), who came from South, fleeing their sinking islands.
The islands inhabitants DON'T call it "Unknown Island".
I call it "Unknown Island" because there are no surviving written records about the island's name to be found in Atrograch.